Company Matches

Takata shares crash again: Will the airbag maker go bankrupt?

The future looks bleak for Takata as the Japanese company's massive airbag recall takes on even more colossal proportions.

The U.S. recall, already the largest in history, expanded this week by a staggering 35 million to 40 million airbags. There won't be enough replacements for all the necessary repairs until 2019.

Takata's exploding airbag scandal has hammered its reputation, soured relationships with customers and sent its stock tanking. The company has admitted it will face "severe challenges" in supplying parts for the expanded recall.

"I think what's going to occur is this will eventually force Takata into bankruptcy," said Scott Upham, the founder of Valient Market Research. "I don't think this is the death of Takata. It's going to emerge as a smaller company focused on their other core products."

The company's beaten down shares dropped another 8.6% on Friday.Takata's stock has crashed about 80% in the past year as fears over the impact of the airbag scandal have intensified.

Faulty airbags made by the company have exploded, firing out shards of metal that have caused injuries and deaths. At the heart of the problem is degradation of the chemical propellant in the airbags' inflators, according to U.S. safety regulator NHTSA.

The vast recall has severely damaged Takata's reputation as a manufacturer of airbag inflators, which are the "profit center" of the overall airbag system, according to Upham, who has covered the industry for 18 years.

"I don't see how Takata can survive as a viable airbag inflator supplier after this debacle," he said.Its options include a gradual exit from the business or a partnership with one of the other manufacturers, he said.

Key customer Honda said in November that none of its new car models under development would use Takata inflators.

"They'll have to focus on the other products to really move forward and get beyond this," said Renee Stephens, vice president for U.S. auto quality at J.D. Power and Associates. Those products include seat belts, electronics and other parts of airbag systems.

Takata hasn't said how much the expanded recall is likely to cost the company.

A Takata spokesman declined to comment on the potential financial implications.It's due to report earnings on Wednesday for the financial year through March.

The cost of the recall is only one of the blows Takata could still face.

U.S. regulators slapped the company with a $70 million fine in November. It's also under criminal investigation by the U.S. Justice Department, the outcome of which could mean even more cash penalties and possibly prison time for executives.

Repairing its reputation is also going to be a big challenge.

Takata was criticized for refusing to own up to the airbag problems for years. Top executives were silent on the issue until last summer, when the CEO apologized for the deaths and injuries and for failing to explain the situation to the public sooner.

And the airbags aren't the first scandal to hit the company. In 2013, three Takata executives agreed to plead guilty and serve prison sentences in a conspiracy to fix prices of seat belts sold in the U.S.